You Wouldn't Believe the Size of Phillips 66's Annual Oil Bill
Phillips 66 (NYSE: PSX) recently reported decent second-quarter results. The energy manufacturing and logistics company earned $550 million, which was up 2.8% from the year-ago quarter. However, what was interesting about that number is how small it was when compared to revenue, which came in at a whopping $24.6 billion. That works out to a slim 2.2% profit margin.
The primary reason Phillips 66's earnings are such a small percentage of revenue is that the company spends billions buying oil each year. Last quarter, for example, the company spent $18.4 billion in buying crude oil and other products that it then refined into gasoline and other higher value products. Meanwhile, over the past year, it has spent more than $70 billion buying oil. To put that into perspective, it's about what the U.S. government spends on education each year. Given that outsized expense, the focus of the company's refining business in recent years has been to gain access to cheaper crudes and make greater quantities of higher-value refined products so it can earn more money on every barrel it buys.
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Source: Fool.com
